Berlin approves 5-year rent freeze

https://www.reuters.com/article/germany-housing-rent-cap/berlin-approves-5-year-rent-freeze-in-german-capital-idUSS8N20O06F

by ciceryadam • 7 years ago

276 574 7 years ago

reuters.com

NikolaeVarius2• 7 years ago

Well, at the very least, will be an interesting economic experiment.

motivated_gear• 7 years ago

This has been tried before in a number of different flavors. Most leave people worse off.

https://www.bloomberg.com/opinion/articles/2018-01-18/yup-re...

Vinnl4• 7 years ago

Thanks, I hadn't realised that obviously existing landlords might stop renting out a place, which would reduce supply of housing - that could be problematic.

It also mentions that apartments got transformed into condos. This might be a problem with my not being a native speaker, but: if one apartment is turned into multiple condos, isn't it able to house more people? (Though being "new" housing, I suppose they'd then be able to ask higher rents again?)

cccccccccccm• 7 years ago

I'm a bit confused, this article seems to only look in depth at rent control in San Francisco? San Francisco and any city in California is a major anomaly compared to other cities in the world. For example, rent control in Montreal works fairly well for renters and has kept the city affordable for the middle class while residential construction still booms.

withdavidli• 7 years ago

Isn't this similar to rent control in the states already, or other incentives that disincentive moving (ex, locking in property tax amount at time of buying)?

vtail6• 7 years ago

As a person born and raised in Soviet Union, I strongly believe that whoever thinks that a proper economic response to raising prices is literally to order them to stop raising, is a lunatic.

tmalsburg26• 7 years ago

Genuinely curious: what do you think would be a better response?

vtail6• 7 years ago

Raising prices = Demand > Supply. You can either try to curb the demand (by e.g. creating incentives for companies to build offices elsewhere, move government bureaucracy somewhere else, etc.) or improve the supply by facilitating new construction, which in most places on earth is limited by, again, local government restrictions.

edits: grammar

deelowe• 7 years ago

Address the issues that are limiting the supply.

georgeecollins• 7 years ago

I am not the OP, but based on the point of view perhaps the OP would say: encourage more housing development to lower prices?

wutbrodo• 7 years ago

If the market isn't the most efficient way to allocate resources, even allocating them centrally according to clear rules makes more sense than just commanding prices to stop rising, as if a price is merely an arbitrary number dreamed up by a seller instead of a description of a market reality that the economy will contort itself to move towards.

letier2• 7 years ago

Taxing vacancy

jacquesm2• 7 years ago

Build more housing, ensure that it can't be bought by speculators, incentivize renters to buy the property they are in.

sonnyblarney2• 7 years ago

If there is a 'market abberation' find it, and deal with it.

For example, if tons of foreigners are buying homes, this might be a problem. Regulate it.

If tons of people are buying 2-3 homes and renting, thereby driving a wedge between home-owners/non-home-owners, regulate that.

If the issue is low interest rates, which are necessary for the regular economy, consider building in housing prices into the inflationary index, because it's a real thing that people have to pay for. This might affect how rate are set. That said, it's ECB and not really Germany anymore. FYI this should hint at the incredibly serious problems of Euro-area countries losing monetary policy by joining the Eurozone ...

If it's really just supply/demand build more homes.

It could be a function of older, crappier areas finally getting caught up in the modern world, in which case this might be an existential change that Berlin will have to deal with. The 'downtown' spots will eventually be paid for by people with decent jobs. Some pretty harsh and weird rules would have to be put in place to stop this.

Zone some areas for affordable housing.

My bet is the answer is mostly to build, but also that it's a 'neighbourhood' issue i.e. Kreuzebeurg (sorry, forget the spelling) is becoming gentrified and that's going to be a tough nut to alter.

cerebrum• 7 years ago

No need to reinvent the wheel: https://en.wikipedia.org/wiki/Public_housing_in_Hong_Kong

rolltiide3• 7 years ago

I think there could be a better way to regulate how rents are determined, for example:

One symptom is that current tenants are subject to arbitrarily high rent increases, masquaraded as "market rate"

But when they finally evict, the landlord has to actually change the rent to something different until someone bites. Often times it is much lower or has some other concession.

If there were some way to regulate this behavior without easy ways to get around it, it could alleviate some pressure.

pinkfoot• 7 years ago

New, affordable, extremely good schools in open fields.

fredm-de2• 7 years ago

Modernize public transit to better connect the outer quarters. Build new apartments on these outer areas.

StreamBright• 7 years ago

Government intervention always work! ;) I am surprised these measured tried again when we know already the outcome. This is the definition of insanity.

_0w8t2• 7 years ago

On a city level socialist policies are OK and can be even good. This is similar how communism works on a family level. In Soviet Union the problems came from central planning for the whole country with essentially no feedback loops for bureaucrats and party bosses in charge.

CPLX11• 7 years ago

As a person living in New York who thinks rent stabilization has been largely more successful than not at achieving its goals, I disagree.

partiallypro2• 7 years ago

The data disagrees with you, it has caused shortages. Especially pre-90s.

Since I was downvoted for stating things that are factually observed:

https://web.stanford.edu/~diamondr/DMQ.pdf

https://www.bloomberg.com/opinion/articles/2018-01-18/yup-re...

https://www.nytimes.com/2000/06/07/opinion/reckonings-a-rent...

https://www.economist.com/the-economist-explains/2015/08/30/...

http://iea.org.uk/sites/default/files/publications/files/Ver...

bobthepanda4• 7 years ago

People who disagree with rent control largely disagree with the goals, which is to keep existing residents where they are.

It’s effective at that until landlords abuse the loopholes, which you have to keep closing through legislative whack-a-mole.

NikolaeVarius2• 7 years ago

It's achieved its goals of letting/forcing people to stay in their apts.

It has utterly failed in actually dealing with housing

urda2• 7 years ago

Except it doesn't work, and has been proven to not actually work.

tathougies5• 7 years ago

Of course residents love rent stabilization. They like it for the same reason the rich enjoy greater returns on wealth. Rent control makes housing disproportionately cheap for those currently living in the city and disproportionately expensive or unavailable for those seeking to move in or youth seeking to move to their own place. In effect, it's a tax on the young and the migrant to subsidize the older, richer, and more entrenched.

Causality1• 7 years ago

The same thing will happen there as has happened in California. Landlords exit the market, developers stop building new housing, and ten years later you have a housing crisis twice as bad as the current one.

lostdog3• 7 years ago

Rent control doesn't apply to new construction in California.

rchaud4• 7 years ago

I wasn't aware the Soviet Union allowed rich investors to buy up chunks of the housing supply and rent them out as hotels without a business license, while also bypassing the numerous regulations that hotels have to abide by.

dgellow2• 7 years ago

If you’re talking about Airbnb, as far as I know what you’re describing is not allowed in Berlin.

jupp0r4• 7 years ago

No, they just declared housing to be affordable (in the $20/month ballpark region) and people had to apply 10 years in advance to move to a larger apartment. This is my parent's experience in east Germany, should be similar to Soviet Union.

ashtonian2• 7 years ago

Even if it was sooooo what? people are able to leverage the property and earn more money on it, because it's worth more because somebody is going to pay it. Of course they are going to do that one way or another despite regulation. And they should they are creating more for the economy. If you can't afford to live/work somewhere that's life ? Why on Earth should somebody else subsidize your costs to live there.

That being said I'm sure there are some anti competitive laws/regulations creating problems but the solution is not more bad regulations.

baddox• 7 years ago

If that is the problem, could it be that regulating that would be a better solution?

jaredklewis2• 7 years ago

Well, if that’s the issue, as a non German who doesn’t understand the situation or surrounding political environment very well, wouldn’t a much better solution then be to crack down on illegal hotel businesses?

Seems like this law is only going to make things worse: the rent freeze will make renting even less appealing to owners, only increasing their desire to run their property as a hotel. No?

odiroot12• 7 years ago

This is not a real problem in Berlin, not at any scale that it matters.

Berlin receives 30.000+ new people every year and builds only ~1/3 of the necessary flats. It just cannot work this way.

jseliger• 7 years ago

It's like we never learn https://www.nytimes.com/2000/06/07/opinion/reckonings-a-rent...

https://www.theguardian.com/world/2015/aug/19/why-stockholm-...

2tab5• 7 years ago

That Stockholm article is deceptive at best. The Stockholm housing market suffers above all else from lack of regulation of mortgages. The rental market simply can't compete with a 100 year double mortgage without default. The result being Sweden having among the highest amount of household debt of the OECD countries. Of course the head of the landlord lobby organization wants their members to be able to charge higher rents despite few rentals being built today when they are able to charge three times the rent of older rent controlled units. As most people simple can't afford them.

johnnyfaehell2• 7 years ago

To be fair, this isn't their first or only response. They're building housing as fast as possible. Within a 5 minute walk from my apartment in the last year there has been 5 brand new housing towers built.

They've also introduced laws to stop people from buying up apartments to rent out via Airbnb.

Considering even with the law that limits how much they can raise their prices, they're just doing unneeded renovations to get around that law and increase the rent 40%.

This law in combination with the housing construction going on throughout the city and the Airbnb law I think it's the right direction.

vtail6• 7 years ago

People buying apartments to rent out via Airbnb is not inherently a bad thing - it just indicates there is existing unsatisfied demand for short term rentals, which cannot be fulfilled by hotel industry. And guess what - hotel industry is another example of an industry heavily regulated by government (zoning laws, construction permits etc.). So the Airbnb problem most likely has the same underlying root cause.

bubblewrap5• 7 years ago

They are not building as fast as possible. They actively drive investors away. Before this rent freeze, they discussed expropriate big investors.

Is there any data on AirBnB affecting the prices?

The city probably simply got more popular, which leads to rising prices.

pantalaimon2• 7 years ago

They're building housing as fast as possible.

That's not true at all. The number of building permits granted has actually dropped and when new developments are granted, the number of apartments build will always be negotiated down from the original proposal.

It's insane. The dense Gründerzeit quarters are the ones that are most popular, yet we are unable to build anything alike.

SomeOldThrow4• 7 years ago

Anyone who looks at regulations like this and sees the Soviet Union is themselves a lunatic. This is not a planned economy, and people do not need to profit from housing to build it, and housing should be a human right.

innocentoldguy• 7 years ago

If you take the monetary incentive of profit away, what other motivator exists for people to take huge financial risks and expend vast amounts of money to purchase land and construct houses and other living structures?

I guess you do have the right to wander into the forest and build yourself a fortress out of pine cones and moss, but if you want to live in a modern house with modern amenities, there's going to be a profit incentive behind it. It's basic economics.

refurb3• 7 years ago

OK, then look at NYC in the 1970's. Severe rent control resulted in crumbling buildings. Price controls are bad policy.

jbullock35• 7 years ago

people do not need to profit from housing to build it

Yes, I'm sure that you volunteer your services to build new housing all the time.

a_c_s• 7 years ago

people do not need to profit from housing to build it

People do need to profit from something to do it in a capitalist society.

codedokode6• 7 years ago

Nice idea. Can I have a free apartment in the centre of Moscow within 5 minutes walk from subway then?

What I want to say is that houses are different and there are places where everybody wants to live and where nobody wants, and that is why the housing prices can be so high. Maybe instead of asking for a fixed rent people should consider a cheaper place to live? Everybody cannot live within 5 minutes from a subway station.

tathougies5• 7 years ago

This is not a planned economy, and people do not need to profit from housing to build it

Can you explain? Even if I were to build my own house, I would myself profit because the enjoyment I got out of the new house would be greater than the enjoyment I'd have had without it, thus my 'profit' is the cost of the enjoyment of my new shelter.

IAmEveryone• 7 years ago

That's true for, say, bread. Or really any fungible good where labor makes up most of the price of the product. If you artificially suppress those prices, there isn't enough money to pay the farmers and bakers, and no bread will be made.

This freeze actually exempts new construction, so the whole problem is mood. But it's still interesting to think it through, and the result is different than simple economics may make you think:

Housing is different than bread, or cars, or mobile phones. It doesn't actually cost meaningfully more to build a new house in the middle of Berlin than to do so in some empty village in the countryside: the costs of material are the same, and for the most part so is labor.

The only difference is the cost of land.

The effect, according to the basic supply/demand scheme of economics you are invoking should be to depress land value, with no effect on the amount of housing units being built. That's true as long as the rent it is possible to charge is high enough to cover the costs of construction. One can take a guess at the actual value by looking for the cheapest rents in newly constructed housing, which for Germany is about half of Berlin's average. In the limit, land value would tend toward zero, although that's rather theoretical because at some point owners just wouldn't care about selling.

This hints at some additional factors that may have minor impact: maybe there is an expectation that land value will rise again after those five years, and the actual discount in the market is therefore smaller, etc. But even then, it's only land value that would be affected.

ashtonian2• 7 years ago

Location location location.

You seem to be asserting that the land value is arbitrary simply because it's located in a different area. The value is higher because the land is a lot more useful/productive / accessible/developed. You can't just wipe all that value away.

toast0• 7 years ago

This freeze actually exempts new construction, so the whole problem is mood.

_This_ freeze excepts new construction, but it exposes the risk of a future freeze. Now, being a landlord in Berlin means being prepared for a rent freeze being applied in the future. That must be taken into account for projections of future income, and will either reduce your projected profit, or require raising rents on new construction to keep your projected profit.

travisoneill1• 7 years ago

The cost of a housing unit will be (land value + construction cost) / density. The idea is that you can simultaneously increase land value and decrease housing cost by increasing density.

jordanbeiber5• 7 years ago

Soviet and planed economy truly sucked, so an anarchy style laissez fair market is the only other viable option?

Why do something equally retarded in the other direction?

Reasonable regulation is the only way we can hope to achieve a decent balance in a social democracy.

Something that arguably works pretty well here in parts of the west.

slg• 7 years ago

These kind of moves are band-aids that don't provide a viable long term solution. But sometimes the hospital is really far away and using a band-aid allows you to temporarily protect yourself from excessive blood loss or infection while you wait to get proper medical attention.

johnchristopher• 7 years ago

Why, how do you do it in Soviet Union ?

wnevets• 7 years ago

Has everyone forgotten about the price freezes in the US? This is hardly a socialist tactic.

bpfrh6• 7 years ago

As a person living in austria, I strongly believe that goverment build housing and strong regulation of pricing and the market is the only way to keep housing affordable for all people and not make it a speculation object like in germany/berlin.

Did you know that in the late 90 the housing was good and affordable?

And that a big chunk was owned by the city or state?

That these things were then sold for pennies, to companies who only want to exploit people?

Did you know that after there were laws passed against raising the rent exorbitant, many companies cheated?

They raised the cost that you have to pay for the house services which are included, without doing that services or charging way to high

edit: fixed formatting

stefanfisk• 7 years ago

the exact same transition happened here in Sweden, and now the housing market is so fucked that it might take down the economy in the next recession.

linuxftw• 7 years ago

Did you know that in the late 90 the housing was good and affordable?

Obviously, affordable is subjective. People in cities have demanded ever-expanding services. Better sanitation, better public transit, electricity, everything new has to be super safe, everything new has to have 16 handi-capable toilets per 1 handi-capable user, subsidized housing for the poor, free education, free higher education, free healthcare, higher taxes on businesses, higher regulation of existing businesses.

Some of those things are probably necessary. Some are probably really nice to have. Everything has a price. Rent control is a great way to make slums. There's no market incentive to make your placer any nicer than someone else's because you're competing for a set amount of $$. The good landlords will exit the business, and you'll only have slums.

codedokode6• 7 years ago

But there are different houses. Typically the most expensive are those located in the center of a big city with good transportation access. Do such apartments need price regulation? Poor people could live somewhere further from center where the prices are more affordable. Otherwise you make those nicely located apartments unavailable for other people who are ready to pay more.

mafribe• 7 years ago

    goverment build housing

Berlin government is not building housing in meaningful quantities to keep up with demand. You can look at BER (the airport that was supposed to open in 2012) to get an appreciation for how dysfunctional Berlin's regional government is.

Berlin's NIMBY population is also to blame, they voted against developing former Tempelhof airport [1]. It would have been easy to erect dwellings for > 10k people there.

The rent-freeze is populist political action to cover up government inability, and redirect anger away from the root cause of the problem (Berlin's government) towards scapegoats. Freezing rent will not create a single new dwelling, indeed it will reduce incentives from building property.

[1] https://de.wikipedia.org/wiki/Volksentscheid_zum_Tempelhofer...

nine_k• 7 years ago

My hope is that it's not a proper economic response, but short-term political firefighting.

That is, "something has to be done" while the capacity is being built, and it cannot be built fast enough.

Surely price control will result in various shortages, lines, increased corruption, etc. OTOH this may be, at least in the politicians' reasoning, not as bad as rapidly pricing out their constituencies out of the houses where they live. And if not directly their constituencies, this applies to all low-wage workers needed by the city economy; raising their wages abruptly would raise other prices abruptly, which may be politically undesirable.

So, as a temporary throttling measure this may be not so nonsensical, with emphasis on "temporary".

coldtea• 7 years ago

And as a person born in the west, ordering prices to stop raising is a useful and often necessary tool in the economic policy toolkit.

s17n• 7 years ago

Capping rents isn't like capping bread prices or whatever - the money is just going to the land owners, there's no elasticity of supply and no marginal cost. Capping rents just means that instead of allocating the scarce housing to whoever can pay the most, and giving a bunch of free money to the rentiers, you allocate the scarce housing more or less randomly, and the renters in aggregate keep more of their money.

usefulcat• 7 years ago

Symptom: rents are too high

Cause: insufficient housing supply

Solution: disincentivize new construction?

tmalsburg26• 7 years ago

Nope. New buildings are exempt.

andy_ppp5• 7 years ago

So living in new buildings becomes undesirable even further because they are more expensive to live in than the rest of the city!

JanSt5• 7 years ago

Would you use your savings to build property in a city with policies like this? How long will new property be exempt? 5 years? What then? Nearly no one will build anything anymore.

cperciva2• 7 years ago

... for now.

But there's a funny thing about investors: They look at what governments have done in the past to judge the risk of things happening in the future. Set a precedent that you'll meddle in the market for political reasons, and every potential real estate investor will be worried that you'll do it again in the future -- even if you're not doing it to them yet.

chmod775• 7 years ago

This would only be true if rent wasn't already (relatively) way above the cost of new construction and if the freeze applied to new buildings too.

Roritharr8• 7 years ago

Why aren't you asking why cost of new construction is this inflated?

Why aren't we trying to fix the supply problems, instead of trying to... what are we trying? I don't understand the whole ideology that sees any reasoning that could lead to this.

andy_ppp5• 7 years ago

Land values rise to make the margins developers work within very small. Land is a problem everywhere and someone owns it and will always try to extract the best price if you have planning permission for it.

So maybe capping land prices and forcing sales for desirable schemes would work better. It will of course never happen as ownership is fundamental to our thinking in the west. I actually find the idea of the government forcing me to sell land I own at below market value quite offensive. I understand that is irrational.

Maybe this problem is quite complicated?

sonnyblarney2• 7 years ago

There can be many causes to this problem, not just an apparent lack of supply. You could just as well say 'too much demand' is 'the problem'.

Aside from regular market issues, there could be a number of external factors (i.e. non-berliner ownership) that might be exacerbating the problem.

aaronbrethorst• 7 years ago

The same argument is happening in Seattle now, too. It seems absurd.

codedokode6• 7 years ago

It might be not so simple. The prices are high in some places (like city center or places with good transportation access) because everyone wants to live there. You can build new houses in other places with poor transportation, but nobody will want to live there.

lm28469• 7 years ago

disincentivize new construction?

Oh but half the city is under construction work right now, they're building shopping centers, offices and hotels (I can count at least 6 10+ storey buildings being constructed in a 600m radius from my place, only one is for flats)

Investors want to max out how much money they make, tourists bring way more money than the general population, especially in Berlin

pkaye2• 7 years ago

So tax the shopping center, offices and hotels more to balance them out.

CydeWeys• 7 years ago

Yeah, it sounds like shopping centers, offices, and hotels are being built because they will be profitable, since there's no artificial limits on their profits.

Housing isn't profitable, so it's not being built. And more and longer rent freezes will worsen the problem.

The developers are being very rational here in what they're choosing to build.

asdff2• 7 years ago

Rent control does not disincentivize new construction.

odiroot12• 7 years ago

Yes, this is how Berlin government operates, more or less.

The same logic applies to planning new underground lines and keeping the city airport functional.

Don't expect rational decisions from this city.

blub9• 7 years ago

The truism of supply and demand seems to be very popular in this topic. The devil is in the details behind the supply and demand and what is influencing both.

In Berlin there's many cases of people being pushed out of their homes because of rent increases, people having to do apartment tours with 50+ other people and having spill all details about their private lives to have a chance at being chosen, etc.

The situation's crappy already. Even if the current tenants will be protected, that's already a small victory.

anoncake9• 7 years ago

The German construction industry doesn't have any spare capacity as is.

gwright6• 7 years ago

High prices are exactly how the free market attracts additional resources to solve capacity problems.

Legislative efforts to limit prices pretty much guarantees that additional capacity will not be forthcoming and that shortages and high prices will continue.

Roritharr8• 7 years ago

I'm so ashamed of german politics of late. We're becoming the country where Homeopathy is GAINING popularity, where policy is increasingly symbolic in the good case, outright ideological in the worst case.

It's really at the point where I don't want my kids growing up here anymore, problem is, where else?

llao2• 7 years ago

Homeopathy is GAINING popularity

Citation please.

Roritharr8• 7 years ago

[1] https://www.spiegel.de/gesundheit/diagnose/homoeopathie-in-d... [2] https://www.bah-bonn.de/bah/?type=565&file=redakteur_filesys...

Sorry for the german sources.

Bayart• 7 years ago

We're becoming the country where Homeopathy is GAINING popularity

In France there's homeopathy propaganda in pharmacies, it's big business here... And we have anti-vaxers gaining popularity, of all things. There's been a big wave of obscurantism regarding vaccines, nuclear, OGM, radio waves...

jotm5• 7 years ago

Don't go to Eastern Europe, absolutely nothing but wastelands there, no houses, no land, no services. Just don't go. Hehehe

Y_Y• 7 years ago

At best you'll produce consumer surplus for lucky renters, and you'll produce sad outsiders who'd be willing to to pay even more but can't get in. Everyone knows this is an issue with insufficient supply (of housing or of nice alternative places to live) but it is popular to put a ban on symptoms.

WhompingWindows• 7 years ago

Rather than think of it as insufficient supply, why not think of it as excessive demand? If there is a trend across the developed world of moving into city cores and working high-paying jobs, then it seems that demand is more at fault. These are very old cities with entrenched interests, do they have the political quickness to respond to these demand trends?

blub9• 7 years ago

Yeah, not everyone has to live in Berlin. Better that the current citizens have reasonable living conditions than everyone paying through their nose.

Everyone knows about supply and demand, few know what the situation's like in Berlin or even care to find out before supplying us with economic platitudes for which there is little if any demand at all.

cperciva2• 7 years ago

Better that the current citizens have reasonable living conditions...

What makes current citizens more deserving than the people who want to live in Berlin but won't be able to due to policies which reduce the supply of housing?

2T1Qka0rEiPr• 7 years ago

As much as I can sympathise with the predicament, this decision, and the Berlin housing market in general, absolutely baffles me.

When I moved here I was warned of 100 people turning up to a flat viewing, and laughed it off as some hyperbole. Only later did I find out that it actually happens, albeit the maximum viewing I went to was around a meagre 50. Having come from the UK, I found the situation in Berlin to be absolutely ridiculous. There are already strict rental price limitations in place (based on location, size of the property etc.), and although these can be skirted, in general they're clearly very effective.

Again, I sympathise with city housing being very expensive, and don't believe that purely gentrified city centres are likely to be a good thing. Still, economics 101 seems to suggest that merely putting rental freezes in doesn't fix the problem. It just (as is already the case in Berlin), leads to excess demand. The solution is to build houses, but what kind of investor is going to throw their money at Berlin, where their opportunity to make a return on their investment is severely hampered? I just don't understand this stance at all.

jordanbeiber5• 7 years ago

It’s an interesting catch 22.

The housing you make margins off are expensive housing in expensive locations.

The reason to keep rents affordable is that it’s generally a good thing in terms of keeping gentrificarion and segregation in check.

Cap on rent can’t be the only policy though.

I see the exact same situation in Stockholm, and there’s a concensus that profit margins are not good enough.

How to solve it?

Either sprinkle lots of tax money in some shape or form or do a quatar fotball world cup kind of setup?

I’m curious, as I see this situation all over, and frankly no one seems to offer a complete solution.

wongarsu• 7 years ago

If the city wants something the market can't provide the solution is to do it yourself.

Berlin is partially doing that. The "Wohnungsbaugesellschaft Berlin-Mitte" is a housing association owned by the City of Berlin that builds and rents out apartments. They more or less act like other investors, just with more focus on social factors than on high profits.

zanny8• 7 years ago

The solution is pretty basic and was proven to work for centuries before extreme zoning intervention by governments happened at the behest of property owners wanting their gentrification.

To fund the program you institute luxury property taxes on units larger than what you want your average citizen to afford and actually property tax businesses (which many cities do not do, because they bribed companies to locate there with agreement they would have substantially reduced taxes). Both should be at progressive rates, the larger companies and homeowners paying more. In any city that has the modern housing price crisis in effect there is plenty of money floating around to pay this and would not "kill" the city to institute because demand is so high already.

Then, with the revenue, you A) invest in public and modernized infrastructure and B) rezone for mixed use or simply dezone your city (the only real valid arguments for zoning nowadays are to avoid overburdening infrastructure and to maintain specific skylines, but policies that prevent vertically entirely are wholly draconian and cannot stand - there needs to be an avenue for vertical growth no matter what).

The infrastructure is ridiculously expensive. Decomissioning streets to build functional bike and walkable space infrastructure, building a comprehensive subway / light rail / tram / trolly network, supporting comprehensive bus service are all major projects. Every city, though, needs to be doing all of these. Private car ownership has to trend towards 0 for anyone living in the city proper, and proper zoning and tax code should incentivize almost anyone within a substantial difference to move towards the city because its cheaper.

Its cheaper to live in a 50 story condo building when you factor in all externalized costs - the lifetime of the building, the heating / cooling efficiency, the infrastructure requirements, the construction efficiency, the materials efficiency, the cost of public services to support the building, the access to productive labor and jobs local to the residence, the climate damaged caused by long commutes from suburbs, the environmental impact of sprawl, the maintenance on infrastructure to support it. People look at how 2500 condos might cost 100 million for the building alone and think that means its inefficient and too expensive... but in practice A) the costs are inflated due to regulatory impedance B) there isn't enough high density demand in most western countries to get economies of scale reducing prices of construction the way they are in Asia and C) even when the building is more expensive everything else is cheaper.

Which probably comes back to the fundamental reason we are in this state in the first place. Externalities are not factored in. Environmental harm, infrastructure & services upkeep, human potential lost, etc all factor in to cost the modern sprawl low density lifestyle and our societies dearly. Cities are actively hurting their responsibility to grow to mitigate this damage, but its also on nations as a whole to stop subsidizing lifestyles that hurt the plant, nations, and people themselves. Cities don't have money to build because money is siphoned to maintain the status quo and that keeps this unnatural unsustainable relationship in place.

jotm5• 7 years ago

Encourage people to buy land and build their own houses?

max_hoffmann4• 7 years ago

Freezing rents is not meant to be a solution for a lack of housing. It’s a solution to the explosive increase of rents of existing ones.

There are lots of people where the rents of their current apartment have increased so much, that they had to move out. This solution is trying to fix that.

Also freezing rents doesn’t mean Berlin will stop building new houses. If there is big demand for housing in a city one needs both:

1. make sure people currently living in the city are able to do so in the future

2. make sure new people coming to the city have available space

Freezing rents is aimed at problem one. These solutions are not exclusive.

zanny8• 7 years ago

Pretty much every western nation has systemically failed to recognize or support the insanely high demand for high density living in the 21st century. That is where the future of economics is, where the future of humanity in general pretty much is, and every democracy is consistently demonstrating the total inability for legislatures to sacrifice the advantage of those lucky enough to inhabit cities as they exist now for the benefit of all those who would grow the economy and future in the cities tomorrow. Largely because those in the cities have the money and influence to buy the politicians.

briandear• 7 years ago

They are necessarily connected. Supply and demand is connected. If rents are frozen, that lowers housing liquidity (because people won’t move if their rent stays “affordable,”) which reduces supply and necessarily creates a shortage. It lowers mobility as well since there is a shortage of available housing which leads to inefficiency— if someone moves to another job in another part of the city, that person would be less likely to be able to move. Then, there’s added stress on transit since people must commute less optimally.

On the issue of new housing, who would risk capital to build new housing when their returns would be subject to the whims of rent caps? What’s the incentive to improve existing housing when the revenue for doing so is limited? Basically, what’s the point of making non-legally required improvements if you can’t raise rent to cover those expenses. That’s going to result in a decline of housing quality over time.

Unless the government is also going to reduce taxes and expenses and inflation for property owners to help offset the lack of revenue growth? Property owner expenses are going down are they? That lack of revenue growth also means less future capital to build more housing.

Rent control benefits a specific group, but ends up costing the whole far more than it saves the few. It’s popular to “protect” the visible because they are visible and typically sympathetic figures. But there is a greater harm being effected that is less noticed because the face of that effect is the “greedy” property owner, but the invisible victim is the overall public.

seunosewa5• 7 years ago

Why must people currently living in a city be able to do so in the future? I think it makes sense to allow people whose skills are more valuable to a city to take the place of those whose skills are ... more valuable elsewhere. Cities evolve. Do I deserve to continue living in a city in perpetuity just because I happened to get to the city before others?

bko2• 7 years ago

Freezing rents to fight increasing costs makes as much sense as limiting the maximum reading on thermometers to fight increasing temperatures.

Prices aren't just arbitrary numbers attributed to goods. They convey information. Information that cannot be captured by any one group alone. That's the point of prices.

Freezing rents will create a lot of unintended consequences, as price controls normally do. I imagine that apartments would be poorly maintained as landlords won't need to attract new tenants. Many people will illegally sublet their homes and capture market rents. Landlords will be suspicious and begin treating their tenants with contempt. Investment in building real estate will reduce considerably. The city would be less vibrant and it will be harder to attract young talent or new businesses.

WalterBright2• 7 years ago

Rent control never works, but that never dissuades governments from trying it again and again.

https://en.wikipedia.org/wiki/Rent_regulation

odiroot12• 7 years ago

Because it's a very effective populist policy to get support from the electorate.

pgeorgi4• 7 years ago

It works reasonably well in the rest of Germany.

As for it not working in Berlin, I have a hard time to come up with _anything_ that works there, so my hunch would be that the housing market in Berlin is broken not because of rent control, but because it's Berlin.

2tab5• 7 years ago

So where does "not rent control" work for long term affordable housing in in-demand areas? I don't think I know of any city comparable to Berlin, in at least size and prospects, that hasn't had significant rent increases in the last five years.

drugme5• 7 years ago

It works fairly well in NYC, too.

Not without tradeoffs, mind you. But it does basically work.

odiroot12• 7 years ago

I found the situation in Berlin to be absolutely ridiculous.

I totally agree with this assessment. I've never seen a city where you struggle to get a flat even if you have the money or can pay more.

The market is absolutely broken with literally everyone competing for the same pool of flats.

meesles• 7 years ago

I don't know, there's something utopian about what you describe. If the city doesn't have housing for everyone, why should the rich get it first? Leave capitalism at the door, we're talking about a roof over your head for janitors vs. business executives.

If an 'ideal' free market means the rich get the houses and the poor are on the street, because developers don't have motivation to build, then I'm happy to see everyone compete for the same housing and seeing both the rich and the poor on the street while we figure out a real solution.

gwright6• 7 years ago

This is a terse comment with not a lot of context, but I think it is misleading to say the "market is broken" as it suggests that the market mechanism is at fault but in reading these comments it sounds like the government regulations are the source of the problem.

srrr• 7 years ago

The rental freeze does not apply for new housing.

(Wohnungsneubau wird vom Gesetz gänzlich ausgenommen.)

https://www.berlin.de/rbmskzl/aktuelles/pressemitteilungen/2...

stickfigure• 7 years ago

This time.

When the next freeze takes place, your residential construction won't be "new" anymore.

bpfrh6• 7 years ago

While it is true, that there are simply not enough apartments the rest of your argument is wrong.

In berlin, the rent limits don't work, because of various reasons, one for example is that companies simply rise the costs that are not rent for appartment, force the people living there out and then raise the rent.

The rent limit is not the only thing that has to be done but it is a step in the right direction.

I always hear the argument about investors and the rent limit, but there are multiple reason why that is a bad argument.

The investors had about 20 years time to fix this issues and make a good living out of it. Instead they raised the rents to exorbitant values and didn't built new appartments.

Investors can still make good money of appartments if they just rent them for a fair amount.

Of course that means they don't get a 200% percent profit, but I don't think that should be the case anyway.

Homes are not up for speculation and profit and they should never have been.

A good chunk of the houses in berlin where owned by the city and state and sold for far too little.

llampx5• 7 years ago

In berlin, the rent limits don't work, because of various reasons, one for example is that companies simply rise the costs that are not rent for appartment, force the people living there out and then raise the rent.

Do you have examples of this happening? Nebenkosten are controlled by the government or the responsible agencies as well, and you get a detailed invoice of any costs so the landlord can't just bill whatever they want.

PavlovsCat• 7 years ago

Homes are not up for speculation and profit and they should never have been.

Amen. Here's a bit by Stewart Lee that I consider more insightful than funny:

Basically, what's happened is, somewhere along the line, as a society, we confused the notion of home with the possibility of an investment opportunity. What kind of creature wants to live in an investment opportunity? Only man. The fox has his den, the bee has his hive, the stoat has a a stoat hole. But only man, ladies and gentlemen, the worst animal of all, chooses to make his nest in an investment opportunity. Mmm, snuggle down in the lovely credit. All warm in the mortgage payment.
Mmm! But home is not the same thing as an investment opportunity. Home is a basic requirement of life, like food.
When a hamster hides hamster food in his hamster cheeks, he doesn't keep it there in the hope that it will rise in value. And when a squirrel hides a nut, he's not trying to play the acorn market. And having eaten the nut, he doesn't keep the shell in the hope of setting up a lucrative sideline making tiny hats for elves. And when a dog buries a bone, he doesn't keep that bone buried until the point where it's reached its maximum market value. He digs it up when he's hungry.
And if estate agents were dogs burying bones, not only would they leave those bones buried until they'd reached their maximum market value, but they'd run around starting rumours about imminent increases in the price of bones in the hope of driving up the market, and they'd invite loads of boneless dogs to all view the bone at the same time in the hope of giving the impression there was a massive demand for bones. And they would photograph the bone in such a way as to make it look much more juicy than it really was, airbrushing out the maggots and cropping the rotten meat.

levosmetalo2• 7 years ago

Why everyone in Germany fixates with "big investors" and fighting them?

In reality 60+% of rental apartments in Germany are actually rented by private owners, for most of them it's their retirement plan. Around 10% of German households receive some rental income. 75% of landlords have ROI of less than 1% per year, almost one half even 0 or negative.

But hey, evil landlords, evil corporations. Corporations would be just fine, someone managing 100000 apartments is much more efficient than someone managing one or two. Those small guys would be just pushed out of market, and only corporations would just buy them out in next decade or two. Then we'll have real rent problem.

deanCommie• 7 years ago

[flagged]

6cd6beb• 7 years ago

A successful society is not just a rampant pursuit of economics and profits at the expense of everything else.

Right, but people are incentivized by the profit motive and generally do what they can to meet it.

To just say "think of the people" is swimming upstream; you're more likely to succeed by finding a way to modify the system to drive people towards actions that benefit each other.

Unfortunately it is not very human to forgo money, power, fame in exchange for what they think is the right thing to do. That's why we've had to create economic or political systems that saddle the drive for those things and steer it towards things that benefit society.

icebraining2• 7 years ago

While I don't necessarily disagree with rent controls, portraying this measure as people vs corps is simplistic. As long as the city relies on private investors to build new residences, lower investment also means the PEOPLE who could have lived in Berlin are left out.

(The measure is also typically bourgeois; it throws some crumbs to fix the outcry so the capitalist system can remain in place)

tannhaeuser• 7 years ago

I'm not American, but I share this opinion. Berlin needs housing - but what they're doing is to make it maximally unattractive to invest in housing. That's just illogical, and even critized by non-profit housing orgs (Baugenossenschaften).

dang3• 7 years ago

Nationalistic and ideological flamewar are not allowed here. Please don't post like this to HN.

https://news.ycombinator.com/newsguidelines.html

Edit: we've had to warn you about this before. Please don't do it again so we don't have to ban you.

walshemj• 7 years ago

There isn't massive sub letting going on then?

llampx5• 7 years ago

I'm not aware of massive subletting going on but in general if you sublet without letting your landlord know about it you risk losing the apartment entirely, and most landlords won't let you sublet for longer than six months. Of course sometimes it does happen. A couple of friends of mine have been in the same sublet for the better part of a year but they're also looking to move to a more stable place. The renter has basically moved out but is keeping the flat around "just in case"

baxtr3• 7 years ago

I am not sure if building houses is the solution. Wealthy people from around the globe will still buy them to rent them out for a profit or let them just sit there empty to visit for 2 weeks a year. There is even a name for that effect, it is called "induced demand".

See: https://en.wikipedia.org/wiki/Induced_demand

seunosewa5• 7 years ago

I feel that the problem is that too many people want to live in Berlin, the solution is for a large fraction of those people to choose to live elsewhere, and the rising rents would have been a good way to achieve that outcome.

nerfhammer4• 7 years ago

Are you saying that shortages are not reduced by having more of the thing that there is a shortage of?

drak0n1c• 7 years ago

Lacking new construction they'll buy up the larger, older family homes as investments instead. That's what happened to San Francisco with its lack of development. If a foreign investor invested $1 million dollars into real estate, isn't it preferable for it to be a few small units in a highrise rather than a good part of a traditional residential street?

amluto• 7 years ago

Wealthy people from around the globe will still buy them to rent them out for a profit

Thereby increasing rental supply. People can and should arbitrage differences between purchase and rental prices.

or let them just sit there empty to visit for 2 weeks a year.

Vancouver figured out how to fix this particular problem — tax vacant houses.

ivan_gammel• 7 years ago

This measure discourages investors to purchase already existing property, for sure. But this also leaves the opportunity to put the money in construction. The market in Berlin is still very attractive due to very high demand, so lets see how quickly can the local councils allocate land for new housing. Some time ago I’ve also heard the complaints that city has no enough capacity to give building permits quickly. Those could be the real bottlenecks in the city which grows by 200 000 every year. It’s also interesting to compare it with Moscow - nearly the same area, but 4 times smaller population and plenty of badly used space (like Tegel airport). Will it be able to keep growing while maintaining high living standards?

ernst_klim• 7 years ago

in general they're clearly very effective.

Oh yeah. Like, it's nearly impossible to find a place to live. Economics 101, true, artificially lowered price is leading to deficit.

air7• 7 years ago

My take is that from an "economics 101" perspective, a rental isn't a normal commodity.

When a vacant rental is first advertised, it is essentially "put on the market" and it's price could be determined by supply and demand in a more or less fair way (assuming "gentrification" is just demand).

But signing a lease and renewing it are very different. For the renter, leaving a rental incurs a very real cost (searching for another place, packing, moving, stress, change of habits etc). It's true that there's also a cost to the owner but it's much smaller (adverting, viewings, risk of unknown tenants etc).

So the "rational" thing for the owner to do is to try and take advantage of this by hiking up the price to include the leaving cost of the tenant. If the market is left to it's own accord, it will cause this.

Of course freezing hampers with the fluidity of the market price. A good middle ground is a predetermined max price increase agreed upon in the lease.

evancharles• 7 years ago

I think you underestimate owner costs of turnover. Risking an empty apartment for even a few weeks can erase your yield for the whole year. Landlords, then, are only likely to hike rent aggressively if it's worth that risk, in other words, when the market price is dramatically higher than the current rent rate.

MickerNews2• 7 years ago

The solution is to build houses, but what kind of investor is going to throw their money at Berlin, where their opportunity to make a return on their investment is severely hampered?

Uh, the state. It's strange to me that someone can honestly ask this question. The free market has failed as is its wont in these matters, this failure always needs to be addressed by the state. Where were you for the last global economic collapse?

ericd4• 7 years ago

What does the last global debt crisis (which was caused by central banks around the world keeping interest rates incredibly low for a long time, which allowed housing debt/speculation to balloon massively, and then tightening suddenly) have to do with the failures of the free market to develop sufficient housing?

And in many major cities, things like zoning are preventing developers from building nearly as much housing as they’d like.

I guess I’m just kind of baffled as to how you’ve reached the conclusions you have. I’d love some clarification.

CryptoPunk• 7 years ago

The last global financial crisis was created by the world's largest Central Bank. It had absolutely nothing to do with the free market when the largest banks were dealing with government-guaranteed securities and were speculating on a government created bubble.

In a free market, all those who poured billions into the bubble would have gone bankrupt and all of their real assets would have been sold off in bankruptcy proceedings to responsible players who are less likely to over leverage themselves and exacerbate the speculatory frenzy in the next bubble.

The only reason the market hasn't solved the housing problem is government interventions like rent control. In places without these interventions and with strong enforcement of private property and contract rights, the market does an absolutely excellent job of providing housing.

The effects of rent control have been observed for a hundred years. In city after city rent control has been observed to cause more harm than good for the population at large.

DocTomoe5• 7 years ago

Uh, the state.

This is Berlin, which actually used the slogan "arm aber sexy" (roughly: impovershed, but sexy).

They don´t have the cash to start building flats with no ROI.

SomeOldThrow4• 7 years ago

I have a hard time being sympathetic to people wishing to displace.

drugme5• 7 years ago

The solution is to build houses,

It's one option among many.

And by itself -- most likely not a sufficient solution (or any kind of a game changer).

I just don't understand this stance at all.

Basically the main reason this "stance" is that the locals know better: that simply allowing newer (unregulated) construction isn't going to bring their rents down -- or that is to say: do something about availability in their income brackets, and not just yours and mine -- anytime soon.

pmiller2• 7 years ago

When I moved here I was warned of 100 people turning up to a flat viewing, and laughed it off as some hyperbole. Only later did I find out that it actually happens, albeit the maximum viewing I went to was around a meagre 50.

The Bay Area has a rather efficient solution to this problem: limit the open house to 15 minutes. I wish I was kidding, but I saw multiple open houses that were literally 15 minutes long, and if you arrived 16 minutes after it started, too bad. And, unless you show up with a pre-filled application, credit report, blood sample, and your checkbook, there's no guarantee you'll even have a shot at the place.

Ok, the blood sample is a bit of an exaggeration, but not much. Apartment hunting in the Bay Area is not something I'd wish on anyone. I'm pretty sure Dante wrote about it in the Inferno somewhere.

ben_w2• 7 years ago

The problem isn’t the number of people showing up, it’s the number of people who want any given apartment. Limiting viewings to 15 minutes may solve disruption to neighbours, but it doesn’t help with the demand-supply ratio.

TomK32• 7 years ago

At the same time german tax office will give you trouble if you don't make enough profit as a landlord.

looperhacks• 7 years ago

Source? Btw, landlords will be able to apply for excemptions, if it is necessary.

welterde• 7 years ago

Here is an article about such a case from Munich (in German): https://www.deutschlandfunk.de/zu-nett-fuer-muenchen-der-ver...

chvid• 7 years ago

Good luck finding a flat if you are moving to Berlin ...

lkqJHA• 7 years ago

No problem: Many people sublet their rent-controlled or outright government subsidized apartments for three times the official rent.

Finding a real apartment where you cannot be kicked out any moment is hard though. The best way in Berlin to find a decent place is to be low-income for several years, get on a waiting list and then finally get one of the luxurious subsidized places.

No chance otherwise.

hashberry4• 7 years ago

If affordable housing is an issue, then perhaps the government should provide it for its citizens, like building huge high-rises in Berlin.

I used to rent in an expensive city but bought a cheap house in the suburbs (thankfully I work remotely). Everything is cheaper out here, from gas to utilities to food. But I did experience classism from my friends and family: there is status living in a world-class city. And having wealth or a high-paying job in the city is part of this status. But many people want the status without having to pay the $$$.

tempsolution• 7 years ago

Last thing I heard, high buildings are mostly infeasible in Berlin due to the unstable underground. You can't build New York everywhere...

Bombthecat• 7 years ago

I doubt that high buildings help, no matter how many people you square per cubic meter, in big cities it will never be enough to allow affordable living...

odiroot12• 7 years ago

Yes but we can at least grow the city up to the 6th floor. There's so many building that barely reach the 4th.

zanny8• 7 years ago

Japan and Korea have managed to build some of the densest cities in the world on active fault lines. For a first world world power economy like Germany reinforcing prime real estate in their capital in the 21st century is not an infeasible economic obstacle.

wander_homer3• 7 years ago

But many people want the status without having to pay the $$$

It's not just about the status. Every city needs people who do lower paying jobs. Someone has to clean those office buildings, someone has to take care of sick people at hospitals, someone has to drive taxis, buses, ... By not supplying those people with affordable housing within the city they're lives only become worse (more money and time spent commuting, less time spent with family and friends).

cyrksoft8• 7 years ago

Every city needs people who do lower paying jobs. Someone has to clean those office buildings, someone has to take care of sick people at hospitals, someone has to drive taxis, buses, ... By not supplying those people with affordable housing within the city they're lives only become worse (more money and time spent commuting, less time spent with family and friends).

They can live in the suburbs. Nobody has a special right to live in a specific place. They can commute like everybody else.

lotsofpulp3• 7 years ago

The pay for "lower paying jobs" will rise, assuming the city actually needs them.

codedokode6• 7 years ago

But there is limited amount of apartments in good places like city center. Are you suggesting they should be for people with low salary and talented people with good pay should live in a suburb without public transportation and spend hours in traffic jams? And tourists won't be happy with this too.

cyrksoft8• 7 years ago

Government should provide it for its citizens

And how do you expect government to pay for that? How do you decide who lives in these houses? It's not that easy. Government isn't a magic entity.

zjaffee2• 7 years ago

One of the biggest costs of new rental construction is financing costs (on a 30 year loan it's often half of the cost). Given that it's cheaper for the government to borrow money than the private sector you can have the government simply build market rate housing, but wouldn't need to charge as much in rent.

In this context, the government can essentially be a magic entity.

hashberry4• 7 years ago

Government bonds. The affordable rent would go towards paying off those bonds. Tenants would be selected by income level and lottery. If cities can build huge stadiums, they can build huge housing complexes.

zanny8• 7 years ago

There are a lot of avenues for taxes, but right now the most ethical tax any western nation could implement is a carbon tax.

Using a carbon tax to guarantee housing to citizens regardless of means, with development planned according to present and forecasted demand, could be this centuries guarantee of clean water or electricity.

DiogenesKynikos3• 7 years ago

Through a high tax on the unimproved value of the land:

https://en.m.wikipedia.org/wiki/Land_value_tax

mrep• 7 years ago

But I did experience classism from my friends and family: there is status living in a world-class city.

Can you go more into depth on that because I've never seen that and some of my extended family lives in small cities/farms in the midwest. If anything, they laugh because I pay $300 a month for parking. Then again, maybe chicago/seattle/san francisco aren't status bearing world class cities.

hashberry4• 7 years ago

Many people treat their city as the center of the world. NYC is infamous for this. "Flyover states" is a common pejorative classist term. Every tech company sets up offices in large cities not just for the talent, but because people want to live in the city, not in the "boonies" or "in the sticks" with a bunch of "townies."

sgift• 7 years ago

That's one of the things being done. Problem is that for a while they didn't (that's what happens when you get people who think the market magically fixes things in power) and building new ones takes time. To get that time a stop gap measure was needed, hence freezing prices for five years for existing houses, no price freeze on new houses.

okr• 7 years ago

The "market" would like to fix it. But it is not allowed to. Because, well, politics or: "people in power" :-)

odiroot12• 7 years ago

If affordable housing is an issue, then perhaps the government should provide it for its citizens

We already pay very high taxes in Berlin and not really getting much back from it (police, firefighters, cleaning services, public transit, even government offices are heavily underfunded). This idea would only make the taxes higher or take away much needed money from other areas.

hashberry4• 7 years ago

What about issuing bonds and using rent to pay off the bonds?

dopamean• 7 years ago

Does this mean that five years of natural price increases will just happen all at once when five years have passed?

rchaud4• 7 years ago

If supply stayed exactly the same as it is today, sure. I would imagine 5 years gives them some room to allow for more construction to increase supply by the time the ban expires.

Vinnl4• 7 years ago

I'd imagine that they hope the five years is enough time to sufficiently increase the supply such that prices can't rise that much.

akerro• 7 years ago

And unnatural homelessness surge will just happen over night in 5 years.

pgeorgi4• 7 years ago

Price increases in housing are limited in Germany and have been for a _long_ time (and tightened up in the last couple years). This specific Berlin regulation is on top of that.

bubblewrap5• 7 years ago

I received a rent increase today, with an apologetic letter that the government is forcing their hands. I suppose I could technically turn it down, but since I have always been on good terms with the landlord, I a not yet sure that I will. I sympathize with his cause.

Other than that, there are also restrictions in place for how much rent may be increased, so I doubt they would be able to make up for the 5 years.

tschellenbach• 7 years ago

Why does the national government allow the city of Berlin to implement such short sighted and destructive policies? There should be some guidelines set by the national government about what you can and can't do in terms of housing supply.

pgeorgi4• 7 years ago

Because Germany is a federal republic. There's stuff the federal government just has nothing to say about.

I mean, in case of Berlin, they could help by moving back to Bonn. Lots of real estate, both office and residential, would free up immediately.

iso-8859-13• 7 years ago

There is fresh federal legislation on this subject: Mietrechtsanpassungsgesetz (MietAnpG). Here is an overview: https://www.etl-rechtsanwaelte.de/aktuelles/mietrechtsanpass...

xxxpupugo• 7 years ago

Seems like only going to create a black market, or funnel the rent in other ways.

hobofan• 7 years ago

Probably not worse than the one that already exists. There are a lot of people illegally subletting their apartments for 2-3x their original rent.

objektif2• 7 years ago

I think the only solution to high rents and home prices is to build more and more supply. But strangely there is opposition to this from both sides of the political spectrum. Left opposes it in the name of “preserving neighborhoods”, conservative wealthy home owners dont want new inventory to reduce their real estate valuations, and developers oppose it because it will eat into their profits.

mixmastamyk5• 7 years ago

Agreed except for last part. Devs want to build homes, as that's what they do.

mantas2• 7 years ago

Nah. Build too much and your margin gets slimmer and slimmer. Build less and get same profit with less work while keeping the market hungry for the future.

dvorak365• 7 years ago

The left has no issue with building more supply. The issue they tend to have is when housing is commodified - the new units being built are for maximizing private profit, not number of people housed. (The former tends to lead to the breakup of established communities as they get priced out of their longtime homes). Lefties I know are incredibly excited about the prospect of massive construction projects to build more public and social housing.

balozi• 7 years ago

Why stop at price controls on housing? Why not just go bravely into the full-blown confiscation and redistribution of private property.

option2• 7 years ago

I’m afraid not everyone understands your sarcasm here :)

2ion2• 7 years ago

It's a running joke that the country and Berlin in particular is turning into GDR2.0. Which is why there's lots of dissent especially among the former East-Germans who feel reminded of something.

bubblewrap5• 7 years ago

You have to start somewhere.

Roritharr8• 7 years ago

I think the main reason why this makes me so angry is because it's Berlin, again, doing something fiscally irresponsible that the rest of the country is going to have to finance in the long run.

How I imagine it to go down would be like this:

Today the politicians pat themselves on the back for their progressive stance on this topic.

In year 2 of the rent freeze most of the property investment will have seized, new construction is going to be mainly be occuring by entities that are forced to construct in this market, which are mostly government backed.

In year 3 the pressure on the city council will be so high that some emergency funding will be requested by the city to support the government backed property developers (degewo, GESOBAU, GEWOBAG, HOWOGE, WOGEHE, WBM) in their quest to buy expensive property from "evil" speculators to build more housing, as obviously the private markets have failed to do so.

In year 5 after two years of campaigning the funding is granted by a then black/green coalition in the Bundestag.

JanSt5• 7 years ago

They already receive $4.4bn/year through the Länderfinanzausgleich (mostly from bavaria) to finance their irresponsible policies. I guess it will just be increased, no need for black/green coalition to add anything.

southerndrift2• 7 years ago

That's a bargain when you remember that Siemens moved its headquarter from Berlin to Bavaria after the war [1].

[1] https://en.wikipedia.org/wiki/Siemens

odiroot12• 7 years ago

I think the main reason why this makes me so angry is because it's Berlin, again, doing something fiscally irresponsible that the rest of the country is going to have to finance in the long run.

This is perfectly stated. Not looking forward to possible SPD+Grüne+Linke coalition in Bundestag.

blub9• 7 years ago

What do you call the chicanery that companies like Vonovia are doing except evil speculation?

Yes, heavy demand with slower increasing supply will result in higher prices, but we're talking about homes here, not iPhones. People can't afford a home any more, it's inhuman to just let them be bled dry or get kicked out in the name of real-estate profit.

Your critique's puzzling especially because this law only applies to existing buildings

Roritharr8• 7 years ago

What do you call the chicanery that companies like Vonovia are doing except evil speculation?

What these companies are doing is despicable, but how do you imagine this rent-freeze will change their behavior? They will go looking for their margins via other means if the market is the way it is right now.

Your critique's puzzling especially because this law only applies to existing buildings

Do you really think that people will Invest in a real estate market that has legislature that is this investor hostile and face the risk of being outright disowned, as also has been proposed in the run-up to this?

I wouldn't touch the Berlin real estate market with a ten-foot pole after this.

option2• 7 years ago

the West is being murdered by populists

dang3• 7 years ago

Maybe so, but please don't post unsubstantive comments to Hacker News.

vchernobyl• 7 years ago

Very curious about this scenario - what about people who have a rent contract with "Staffelmiete" (meaning rent goes up by a "small" amount each year)? Does it mean this annual increase is now seen as invalid?

nickpp• 7 years ago

And in other news: “That can’t be graphite on the ground”

nielsole3• 7 years ago

This will prevent the referendum to expropriate major german housing companies to gain traction. So in this way this could actually be considered as a pro-market law when considering the political alternatives.

pure_ambition• 7 years ago

I think most people with an understanding of economics would agree that more supply is needed. The problem is, zoning laws are made by the cities themselves, which means they are ultimately made by the people who already live there. People who already live there don't want their neighborhoods bulldozed for luxury high rises, which is what happens when zoning is abolished.

Then, there is the problem of the suburbs. A lot of people suggest moving to the suburbs and embracing a longer commute as the solution. The problem is, suburbs also control their own zoning laws, just like cities, and surprise - they also don't want their neighborhoods bulldozed for luxury apartments.

So the problem is essentially a power issue - who holds the power? Without the political power to make zoning changes, little new housing will be built. I don't see a solution here. So it seems that the local people embrace rent control as the best possible solution among alternatives. Viewed from that perspective, it's not so bad after all. The city's residents will feel the impacts, and if it's not working out, they will eventually repeal the law. Big deal.

jlawson2• 7 years ago

I wish someone with a deeper understanding would go to Japan and study how they got this so right. Their zoning laws don't separate uses, only nuisance levels, so you often see residential in commercial areas and small shops in residential neighborhoods. It's amazingly effective at reducing how far you need to go to get places, and gives the whole city a much more organic feel. Plus, there is actually housing if there's demand for it.

Is it just Japanese cultural collectivism that made this work? How did they make this happen when we failed so badly? I have no idea.

claudeganon4• 7 years ago

It’s actually pretty simple: housing isn’t an investment vehicle like it is in many parts of the West. The social and historical reasons why this is so in Japan are complicated, but the overall circumstances are not.

You can either have affordable housing that’s not an appreciating asset or let finance/real estate Capital run roughshod over everything in speculative flurries, leading to the insane state of affairs in many western cities today. You can’t have both.

asdff2• 7 years ago

There's definitely a cultural element but it's also due to how buildings are used in japan. Black mold makes it where you really don't want to deal with a structure over 40 years old so there's always things being destroyed and new structures being built rather than old structures being renovated; neighborhoods are in a constant turnover and buildings are disposable. All of urban Tokyo was also destroyed during WWII and had to be rebuilt in a new way.

In the U.S. you might have some neighborhoods that have been largely the same for the past 50-100 years. Since there's no absolute need to replace housing stock unless disaster, people are much more emotionally invested in the existing layouts of their neighborhoods, and advocate against their own economic interests by voting down new developments or zoning changes.

zwarag• 7 years ago

Japan overall or Tokio specifically? Because Tokio would be a bad example as it’s super dense and I think that is exactly what residents try to prevent

leoh• 7 years ago

This is spot-on. Completely agree. Tokyo is an incredibly comfortable, quiet city. Preparing for a three-week trip, I expected it to be like New York — crowded, expensive, uncomfortable — but it completely blew my mind. I had never thought that the constellation of density, quiet, reasonable rent, and a first-class city were collectively possible.

jk27277• 7 years ago

Berlin will be the Lisbon of the 90ies. Well deserved

pierrebeaucamp• 7 years ago

What happened to Lisbon in the 90s?

iso-8859-13• 7 years ago

Translated from the German Wikipedia article:

In 1947, António de Oliveira Salazar initiated a rent freeze for Lisbon and Porto, which remained in force for over 40 years and ensured that for some old-style apartments in the late 1980s, <5 euros/month had to be paid. After the freeze, rent increases remained limited to inflation until 2006, so that rents remained very low. Many homeowners let their old apartments become derelict because the money was missing for renovations. Sanitary facilities with shower and toilet were missing in many buildings. In the center of Lisbon, about 20 houses per year collapsed at the end of the 1990s due to poor condition.

xmly• 7 years ago

This is totally wrong!

The government should never intervene market!

max_hoffmann4• 7 years ago

Nope, because the market doesn’t care about you. It doesn’t care if you have a place to live, if you are healthy, if you are safe…

Not restricting "the market" at all leads to a worse life for humans.

oezi2• 7 years ago

There are a lot of factors at play here:

1.) Supply is inelastic because construction work and building approvals are limited by current capacity. It is not feasible to expect the market to react as quickly as 600,000 new inhabitants over 10 years required.

2.) A lot of policy is still considering this to be a fad before cities become less popular again. Berlin's plans had for instance foreseen falling demand for schools due to demographic change and now rising birthrates (good economic situation) and influx of young people into cities are causing a trend change (for how long?).

3.) Current ECB rates are causing a housing bubble in Germany where many people are buying property for the first time. Because these properties are mostly rented when purchased but renters can't be terminated in Germany, the only way to evict is by raising rent until renters give up. Putting a rent freeze into place makes sense to prevent this and the rampant luxury renovations which don't create more supply.

4.) Berlin at its peak (1944) had still more than half a million more people and is surrounded by mostly empty countryside. It could easily grow to 10m as Paris or London.

zanny8• 7 years ago

a fad before cities become less popular again

The only way this happens is if cities like Berlin putting rent freezes prevent construction that would increase capacity and lower prices to allow people to live in cities. There will be no new economic growth where people are spread thin - all future productivity will only emerge where people are. Any country trying to do anything but centralize their human capital in cities will find themselves at economic disadvantage going forward.

oezi2• 7 years ago

Or technology (self driving cars, remote work) and social change (universal basic income) would not require you to live in a city to work there or work at all that productively.

blub9• 7 years ago

Regarding 1: Germany's economy is doing well compared to the surrounding countries, so they're attracting many foreigners, especially in Berlin. These foreigners need a place to live, which is one big driver of rent increases.

Regarding 3: landlords are successfully invoking the "right of own use" to evict tenants. They are basically claiming that they need the apartment for themselves, a relative, etc. [1] Furthermore, thanks a relatively recent law, the landlord can't raise the rent for older buildings indefinitely - there's a cap. New buildings are exempt. For those rents start high and there's a standard ~2.5% increase per year.

[1] Article in German: https://www.spiegel.de/wirtschaft/soziales/mietwohnungen-eig...

odiroot12• 7 years ago

so they're attracting many foreigners, especially in Berlin.

Which is very ironic because Berlin is one of the least prosperous cities in the federation.

odiroot12• 7 years ago

Berlin at its peak (1944) had still more than half a million more people.

Yes, with 2 - 3 times more flats per every floor in a building. And with whole multi-generational families living in every one of them. Don't forget sharing one bathroom between all this families and sometimes toilets just being wooden huts outside.

Try visiting Mitte Museum in Gesundbrunnen, you'd see how miserable pre-war housing was, yes even in the very centre. The area around Ackerstr. was much more dangerous than Alex or Kotti is today.

jotm5• 7 years ago

Sounds like Britain. Today.

sagichmal• 7 years ago

The notion that Kotti or Alex are dangerous by any coherent metric can only be understood as satirical.

nickik3• 7 years ago

3.) Current ECB rates are causing a housing bubble

People keep saying stuff like this but this is a economic theory with very little actual support in any evidence or even in most economic theory of how montary policy works.

durdleturtle• 7 years ago

This seems like it could be dangerous as it creates incentives for slumlords. If the landlords need to raise rent but they can't, then the only way for them to turn a profit is to cut their expenses.

MickerNews2• 7 years ago

Or just sell up and find a more respectable way of making money, increasing supply in the buyer occupier market, lowering prices.

rorykoehler• 7 years ago

Which is illegal in Germany.

iso-8859-13• 7 years ago

More details on the German Wikipedia article (it can be translated): https://de.wikipedia.org/wiki/Mietpreisbindung#Mietpreisbrem...

Interestingly, legislation like this was in effect from 1945-1988 in West-Berlin.

amai• 7 years ago

Interesting, this legislation actually was invented by the Nazis:

"On October 17, 1936, the National Socialists imposed a rent freeze and further rent authorities were established. After the end of National Socialist rule, this regulation initially continued to apply in both parts of Germany, which is why home ownership was often considered "unprofitable" as early as the 1950s, as the costs for maintenance, repairs and administration continued to rise every year.

Translated with www.DeepL.com/Translator"

azhenley• 7 years ago

I just listened to a very relevant Freakonomics podcast, "Why Rent Control Doesn’t Work (Ep. 373)". http://freakonomics.com/podcast/rent-control/

cwperkins• 7 years ago

I will eagerly wait to see how this unfolds. Count me in the skeptical camp though.

From an outside perspective it looks like the Overton window in Berlin is skewed heavily because of the runaway prices. I remember just last month the huge protests against Deutsche Wohnen and people demanding the nationalization of apartments. It’s no stranger in New York City that the most inattentive landlord that had the hardest time getting things done is NYCHA, the city agency. I’m skeptical of this solution, but the alternative was scarier.

bronzeage• 7 years ago

the only scalable solution is to reduce demand, not increase supply. cities are already getting pretty saturated, and building more houses isn't going to solve a thing.

what is really needed is very fast public transportation from outside cities to the cities themselves, and incentives for workplaces to split into sub-branches in other nearby locations instead of endlessly expanding within the same city.

most people would prefer living outside the city for cheaper and higher quality of housing, the force pulling them back towards the city is the transportation distance to work. the force pulling workplaces into the cities is that they want to minimize transportation time for potential employees (unless the workplace has a location tied to the city), while they still need to cluster employees who have to work together.

so everything is clustered, and there's nothing to do about it.

only way that this can end, is if you reduce the force pulling everything together - by reducing transportation distance - while in the same time, you need to introduce some incentives for workplaces to split to sub branches.

toper-centage2• 7 years ago

As someone who rides the S-Bahn for 30 minutes, having an express S-Bahn that takes me straight to the center would be really nice. But there are only 2 S-Bahn tracks most of the time :/

hokus4• 7 years ago

Its really simple. We should tax property AND rent to the point where it becomes unprofitable to hoard it for purposes of unproductive wealth extraction. Then change all rent contracts into lease-buy contracts.

You would accumulate a good percentage of madly overpriced rentals that no one wants then they go bankrupt one by one. You get those delicious market dynamics we [apparently] crave more than any social convention. Buildings should be hot potatoes that you don't want to hold for to long. With this much demand it wont even affect housing prices but even if it did, who cares?

Gradually, (in stead of rent) people pay tax at market rates. We can keep the large scale wealth extraction and continue to force people into productivity only it would be the government doing it.

The same logic applies as with the teachers, taxi drivers, cleaners, garbage men, restaurant employees etc: If you don't like it you can just leave the city. Get some of that delicious mobility going and gtfo. They can just leave for the sake of efficiency and availability. Its that simple: Just go away.

If you have to chose between [say] 1) a corner store OR 2) a land lord it should be obvious which one to get rid of.

If they are contributing to quality of life by selling food and employing people we should consider giving the store a tax cut. One could also extend the tax cut to the people working there and have cheap stores.

Its hilariously unproductive to have a usury scheme of greedy unproductive rent seekers extracting wealth from every transaction that is some how remotely related to real estate.

I just want to pay for the ice cream, pay the people involved in making the ice cream happen. Why would I pay 80% to someone who doesn't do anything I need?

Pyxl1014• 7 years ago

Can you clarify what problem you are trying to solve with this proposal?

No one is obligated to rent a property from someone else. You rent if you believe it's in your interest to rent, instead of buy. Why stop two consenting people from entering into rental agreements, both of whom believe it's in their interest?

Some people prefer to rent: they don't want to be obligated to live somewhere for 10 to 30 years. They prefer to be free of commitments and loans (and/or don't have enough cash to buy). I wanted to live somewhere for a medium period of time (a few years) with no significant commitment or risk, then move on. I had just moved to the city and wasn't sure where I would ultimately want to live long-term. Landlords can also rent properties to people who have far worse credit and far fewer assets than would be required to buy the same property. I was able to rent a property much nicer than I could have afforded to buy at the time, since I had income but little wealth and credit. (The landlord in that case is taking on unsecured risk that I will default on our contract.)

Landlords also provide useful services to their tenants: they are responsible for all upkeep associated with the property. When I rented, I was glad not to have to deal with any of that. Landlord takes care of all the yard, or common spaces in an apartment, and if something breaks I just call the landlord. If you own appliances and real estate yourself, then you are potentially on the hook for significant costs if something breaks. Maybe the refrigerator breaks and you need to buy a new one: the landlord needs to budget or purchase insurance for that, while a renter does not. Landlords also assume liability for their property: if e.g. asbestos is found on the land, they may be responsible for paying for the cleanup.

Property owners are forced to tie up their assets in the real estate. Renters don't have to. Let's say that I have $1 million in cash, and I want to live somewhere. I don't necessarily want to have to invest all of my cash in real estate - not even a down payment on a mortgage. Renting might be a preferable alternative so that I can use my cash for other higher-value investments or to fund a business.

Lastly, landlords assume risk. If they can't find a tenant for their property, then it sits idle and they take a loss. When you own property, you can lose a significant amount of money if the property depreciates, as happened during the last recession. When you're renting, your risk is capped - you owe the rent but that's it.

Renting isn't wealth extraction. Like staying in a hotel, it's commerce, an exchange of money (rent) for services (temporary right to occupy a property). If you want to buy a property from its current owner, instead of renting it from them in a landlord-tenant relationship, then make them an offer, and if you both agree then you can do that instead.

Xylakant• 7 years ago

No one is obligated to rent a property from someone else. You rent if you believe it's in your interest to rent, instead of buy.

Ok, how does this work. In germany, you usually need to pay 20-30% of the full price from your own saved funds when buying property. 100% financing is rare and usually only available for people that have sufficient assets. So people that have a low income basically never have a chance to buy. They don’t choose to rent. Their only alternative is living in the street.

Rents in Berlin have been rising substantially faster than wages for the last decade or so, turning this into a vicious circle that even the middle class cannot escape from.

drugme5• 7 years ago

No one is obligated to rent a property from someone else.

That's a pretty weird statement to make.

Do you really believe that everyone (or even a majority) of people who currently rent are in a position to buy a place to live if they wanted to?

hokus4• 7 years ago

Can you clarify what problem you are trying to solve with this proposal?

Say we live in a town where we make all the decisions and our word is law. Our imaginary town needs 2 garbage men, one to pick up the bags, one to drive the truck. We need a truck, fuel, some place to dump, our garbage men need some cloths, a place to sleep and they need to eat.

We take some city land, build 2 house and a garage.

With them serving tens of thousands of customers we can both pay them a nice salary and make the service cheap.

Now we can add a 3rd person who does nothing and pay him a huge sum for his services. We can make fancy documents dressed up with powerful geometry and invent some fancy title for this 3rd person. Say we call them Lords.

With tens of thousands of customers it seems like it doesn't matter. They can pay an extra 100 bucks annually and we could easily finance the 3rd or perhaps a 4th person who also doesn't work. They could live in great wealth without anyone getting upset over it. We could lower the salaries from the first 2 and make room to add a 5th.

Then one day the plumbing starts to leak. It might be portrayed as if the Lords repair the plumbing but the reality is that it requires a plumber.

What I'm trying to say is that however complex we make the bureaucracy, the way stuff works hardly changes. At least not until the bureaucracy becomes so important than there is no more room for the work.

I think that problem can be solved long before.

No one is obligated to rent a property from someone else. You rent if you believe it's in your interest to rent, instead of buy. Why stop two consenting people from entering into rental agreements, both of whom believe it's in their interest?

In the existing formula our 2 garbage men are obligated to rent a property. The citizens will have to pay whatever the greedy unproductive landlords want them to pay.

That people can afford this only makes the problem worse.

It's consent only if the other voluntarily agrees. Individually they could chose not to be garbage men but that doesn't mean we no longer need garbage men.

Sure, we can have a thousand applicants and the winning one could be someone willing to drive 2 hours to get to work.

On a personal level that might seem like a reasonable way of doing things, as a town or city trying to organize it self its just poorly done. The citizens pay more than it costs and they are not getting anything for it.

We've sacrificed efficiency for exploitation. Or we've collectively done a half ass job organizing our shit and now we have to pay for it.

Some people prefer to rent: they don't want to be obligated to live somewhere for 10 to 30 years. They prefer to be free of commitments and loans.

There is never any obligation to live some place. That would be inefficient. If rent contracts are replaced by lease buy contracts you don't need credit. You can pay rent 12 months then leave. The land lord would be obligated to buy back your share of the house or he has to sell it.

Landlords also provide useful services to their tenants: they are responsible for all upkeep associated with the property.

I don't want their services because they are madly overpriced. I want the actual market to do these things.

Property owners are forced to tie up their assets in the real estate.

no no no, they chose to do this because it makes a good investment. We can regulate it to be highly undesirable to own property which will drown out everyone except those who really need it.

Lastly, landlords assume risk. If they can't find a tenant for their property, then it sits idle and they take a loss.

This would be the desirable mechanism. Sadly there is so much demand they would have to ask absurd amounts of rent to be able to not find anyone.

When you own property, you can lose a significant amount of money if the property depreciates, as happened during the last recession.

This can only happen if the market value grows beyond the new value. Don't feel sorry for investors. We are currently forcing people out of their home to satisfy all that greedy exploitation. Investors only risk losing part of their investment. Its not like they are out on the street like tenants during the great recession.

When you're renting, your risk is capped - you owe the rent but that's it.

I'm perhaps a lot older than you. I've seen many cases where people died and the relatives had to pay rent, clean out the house and return it into the claimed original state in less than 30 days OR pay some truly insane amount of money.

Say the previous owner build a garage, do you want it? Say they moved some walls around, put in a fire place and got a fancy kitchen? Say there are 20 trees in the back yard?

Mum died, you get 30 days. Don't forget to dig out the swimming pool as well.

Greedy unproductive cruel dictators they are AND they own you. Its a much to attractive scheme, it should be heavily discouraged in favor of economic activity, efficiency and quality of life.

I've paid the construction cost of my house 3 times now but every year I have to work more hours per month to live there???

Maintenance involved 1 phone call every 2 years and roughly 0.005% of the value of the place.

Almost every house on the block has the same owner. A decade ago we were allowed to buy it. Now they only sell houses to investors with the tenants still in them. The market value is about 7 times the construction cost.

They take 10 times the value of the house and not do any work.

If rather than me paying them they paid me the rent they would still be making crazy money without lifting a finger.

I work, other people have to pay for my work. Half of their money goes towars lazy greedy unproductive dictators. 1/3 of their money went to lazy greedy unproductive dictators too.

Then add taxes and they have to work 8 hours to get 1 hour of my labor.

And that my friend is ruining economic activity. Cut them all out and you will have an explosion of enterprise. Let the ponzi people take a risk and invest in that.

I didn't start pondering what is wrong until I see people having to pay rent for flooded houses.

Without risk it is not investment, it's pure exploitation and we are forcing people into it.

leereeves2• 7 years ago

And who would build new rental properties under those conditions?

mc32• 7 years ago

Under those conditions I think only the state begrudgingly would build large blocks of cookie cutter but pragmatic flats. Something ala eastern block country estate housing.

I don’t think we want that. Although some do want that. S better alternative is Tokyo or Singapore (though they had their state built flats too —which inspired state built flats in Brazil.)

whymsicalburito2• 7 years ago

They wouldn't, and that's the point. They would build housing for purchase and make their profit on the sale. Pretty simple.

esoterica2• 7 years ago

If you tax rent, landlords will pass the tax on to renters. All you are doing is making renting more unaffordable.

whymsicalburito2• 7 years ago

But buying will be cheaper than renting, so it seems just fine that rents would go up.

hokus4• 7 years ago

yes, to the point that [say] 10% of the rentals are empty.

caseysoftware• 7 years ago

While rent may freeze, what are the unintended consequences?

- Will enough of the "right people" be able to move in to fulfill the right jobs? Keeping a barber seems great until you realize that there aren't enough doctors.

- Will "rent" be shifted to other, less trackable metrics? Will there be large application fees to apply? Does Berlin have something similar to condo associations or HOAs that will increase?

There are consequences to every action.. are the first order ones acceptable here?

cyrksoft8• 7 years ago

Can they use Airbnb and the likes to bypass this?

nullwasamistake2• 7 years ago

Rent control is almost always a disaster. It benefits current residents at the detriment to everyone else. Look no farther than SF or NYC. I have a friend in NYC paying 2000 a month to be a roommate to a guy paying 1500 for the whole place. Yeah he's paying more than this guy's whole rent, because the apartment is rent controlled.

gwright6• 7 years ago

Agree with you about rent control, but I'm assuming that the "guy" must be breaking the law. If people in rent controlled apartments are free to sublet at market rates, that seems like a huge loop hole easily exploited.

Regulations like this tend to create incentives for corrupt practices of all kind.

nullwasamistake2• 7 years ago

They're not allowed but it's so hard to evict people from rent controlled units in NYC, and so lucrative to rent out your place, that it's extremely common. Maybe more than 50% of units. A lot of times you rent to a friend or relative so they don't rat you out. It effectively turns rent control into a $1000+ a month untaxed subsidy. I'm sure there's plenty of people that rent out more desirable rent controlled units and don't have to work a day in their lives.

justnotworthit• 7 years ago

Paul Krugman, 2000: https://www.nytimes.com/2000/06/07/opinion/reckonings-a-rent...

"The analysis of rent control is among the best-understood issues in all of economics, and -- among economists, anyway -- one of the least controversial."

"So now you know why economists are useless: when they actually do understand something, people don't want to hear about it."

08-15• 7 years ago

Isn't it amazing how short politicians' memories are?

It's been only 30 years since the GDR (German "Democratic" Republic, aka East Germany) collapsed. In the GDR, all rent was regulated to a "fair" level. The result was a universal scarcity of housing, and existing houses were decaying, because nobody would invest any amount of money into maintenance. The best housing available in the 1980s were those ugly and uncomfortable apartment buildings made from mass produced concrete slabs, which everyone just remembers as socialist architecture. And "available" meant you had to wait for many years. Still, the alternative was to live in a house built in 1910-1930 and not maintained since 1950.

There is no place in the world that could document this failed policy better than Berlin: the contrast between East Berlin (ugly ruins) and West Berlin (nice houses) is striking, even today. But the Berlin senate decides to go with socialist thinking again. However, that was to be expected after the Berliners voted the old Socialist Unified Party (renamed twice, but otherwise unchanged) into the senate.

nickik3• 7 years ago

The only way to actually solve living prices is increase in living space. Its as simply as that. Literally nothing else has worked, and the cheapest cities to live in are those that build a lot of new apparment buildings. Everything else is political snake oil that usually makes the problem worse not better. This is the most basic economics that has been shown over and over again for 100+ years.

If you want to do something useful. Do infrastructure building and make more of the surounding area accessable for large scale building programs.

Make regulations for building easier to handle when building new houses. Meaning allow to build higher and so on. I bet there are 100s of unnessary regulations that have accumelated over the last 50 years.

oytis2• 7 years ago

People are bringing in the supply-demand curve from their school economy classes. The problem is it doesn't work that way with housing. There is zero incentive to build affordable housing when you can build a luxury house. On the contrary, landlords in Berlin "renovate" all the time, to make normal apartments into luxury ones.

So without regulation, the supply for affordable housing is diminishing. To increase the supply and reduce the prices, one needs regulation. Without all efforts to reduce prices by giving landlords the opportunity to build more affordable houses will be wasted. They don't want this opportunity, they need as much money from each square meter as they can get.

I am all for building more where there is space, it just needs to come with some regulation. That is, a certain quota of social housing in each building, prohibit meaningless renovations, make it less attractive to use property as an investment.

Rent freeze does some of this. It lets people stay in their house, preventing further gentrifying districts (which would lead to further rise in prices in a kind of a positive feedback loop). And what is important, it makes property in Berlin much less attractive of an investment, because nobody knows what else to expect from the senate (even expropriations are discussed).

I don't expect it to solve the problem completely, but it will definitely slow down its progression.

fredm-de2• 7 years ago

Luxury housing, too, does create supply. Prohibiting the construction of luxury apartments will just end with rich people paying luxury money for standard apartments thus raising prices and people with less financial means will be priced out.

oytis2• 7 years ago

Or will just move to a city that is willing to provide them living conditions they want (Munich, Hamburg, whatever).

Also when we consider new houses, luxury house creates less supply than a normal one by having fewer apartments.

chappagetti• 7 years ago

This means that who gets a place to live and who doesn't will be decided by factors other than willingness or ability to pay. I imagine renter selection will come down to criteria that are no better and possibly borderline discriminatory -- how do you choose which renter to go with when you have 100 to choose from all paying the same? Should we make regulation for renter selection also?

Berlin approves 5-year rent freeze

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